Interview"The problem is not the existence of a Startup Nation, but the way it is run"
Interview
"The problem is not the existence of a Startup Nation, but the way it is run"
Prof. Sibylle Heilbrunn, an expert in organizational sociology, points out Israeli tech’s failures and recommends considering raising taxation on capital
Prof. Sibylle Heilbrunn, an expert in organizational sociology, called her new book "Dark Sides of the Startup Nation: Winners and Losers of Technological Innovation and Entrepreneurship in Israel." Heilbrunn, the Dean of School of Social Sciences and Humanities at Kinneret College, explained to Calcalist the reasoning behind the name and why Israel must avoid emulating Silicon Valley.
What is the dark side?
"The dark side is that 11% of the workforce enjoys exorbitant salaries and is leaving everyone else behind. There is no agenda for this wealth to trickle from the center to the periphery - and indeed it is not."
Did these gaps affect the last elections in Israel?
"Itamar Ben-Gvir's voters are the same ones the industry left behind and who feel irrelevant."
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Prof. Sibylle Heilbrunn, Dean of School of Social Sciences and Humanities at Kinneret College.
(Photo: Yair Sagi)
So high-tech is dividing Israeli society even more?
"Yes, of course it is divisive, especially the current model where the output isn’t staying in Israel and creating factories and jobs."
Why did you start researching this topic?
"The motivation for the book came from my experience with the students at Kinneret College, who have no chance of entering the high-tech sector, except for a few stars, because of lack of skills. I also researched the topic of entrepreneurship, and I began to ask myself where is this Startup Nation? I came to Israel from Germany as a volunteer during the 1980s arriving at Hashomer Hatzair kibbutz where money didn't play a role because I connected to the concept of an egalitarian society."
What has changed in Israeli society since then?
"Israeli society's disregard for social disparities is increasing, and high-tech has succeeded in dispelling myths: for example, for the first time they started talking about bringing in non-Jewish workers when the need for high-tech engineers grew. Then, suddenly, it was possible despite the restrictions of the Law of Return."
How is high-tech widening the gaps?
"There is a widespread assumption in society that there is equal opportunity, that if you are a smart entrepreneur that takes risks and works hard - you will succeed. This, of course, is not true. It has to do with the fact that there are technologies that make people redundant and there are technologies that require high level skills. It has to do with the fact that there is a management layer that earns a lot of money and the situation where those who have a technological education can demand higher and higher salaries. All over the world this has led to inequality. The best example is Silicon Valley, which we so want to resemble."
What's wrong with Silicon Valley?
"Silicon Valley is social gaps at its peak, of wealth living in the ghetto. This is exactly the model that Israel should avoid. All the wealth is concentrated there and anyone who is not part of the game is pushed out. There are a lot of homeless people around. We are already somewhat there with what is happening in Tel Aviv."
What is preventing someone from the periphery from establishing a startup?
"What predicts success in high-tech is that your parents have money and an academic education. It is well known that 90% of startups fail, and when a person from the suburbs goes into debt of $5,000 because their startup failed, it is a disaster. When an entrepreneur whose parents live in a well-off Tel Aviv neighborhood fails, it is no big deal. They will try again. Anyone who can afford to build a startup is a person with a strong financial background."
So high-tech creates gaps. If I'm on the winning side, why should I care?
"When there are many poor people who have no chance of succeeding, the level of crime increases. There is already a private security company in Caesarea. I would not want to live in a ghetto full of rich people. There is such a big gap between different groups that there is no connection between them and it causes tensions. What we saw during the last elections is a rise in populism and voices calling for 'a strong leader'. In every society there is inequality, but you can't leave people without a foundation to live on."
So it would have been better had we not become the Startup Nation?
"There are very successful high-tech countries that have remained more egalitarian. For example, Sweden, whose high-tech sector is taking off. In Israel, the attitude that the state should provide services to its residents at an acceptable level has disappeared. Those who have money receive a very high level of health care, and those who do not will die waiting in line; If you have money for private lessons, your children will graduate in high-tech, and if you don't, your children have no chance."
How do high salaries hurt the periphery?
"What affects the periphery is wage disparity. The population that is below minimum wage is growing or receiving income support - while the salaries in the high-tech sector are increasing. The life of the people in the periphery is becoming unbearable because they do not receive services and they see that there is an elite here that buys whatever they want."
How does this affect the middle class?
"The middle class is eroding: the center of the country is not accessible to them, they cannot buy themselves housing there. These are teachers, nurses and police officers whose salary levels are constantly being eroded. At the same time, more and more people work as freelancers. They have no security for the future such as pensions. If tomorrow they get sick - they have no income."
Is the government right in that the solution is additional high-tech employees?
"There is no potential for more people to enter high-tech. In Tel Aviv and in the center 12-13% get a high-tech matriculation certificate and in the north and south only 7-8%. This is the potential of the people who can join high-tech and the education that people in the periphery receive does not enable that."
Why?
"It begins with English-speaking capabilities. High-tech functions in English, and if young people from the periphery don't master the language - they have no chance, even if they study engineering at some college. They come with such great deficits from schools, that the colleges can't close the gap. It is not possible to teach someone English from scratch and expect them to do well using high-tech English. High-tech is also a closed off social bubble. Recruiters don't know how to deal with ultra-Orthodox, Arabs and women."
So the main problem is English?
"No. It's also having mathematical thinking. Israel's results in the PIAAC test, which tests the skills of adults, are a catastrophe. The gap in skills between high-tech employees and others is huge, much bigger than in other OECD countries."
The government is investing a lot in integrating weak sectors.
"A lot of money was invested in this, but the expansion of high-tech to the periphery does not work. They failed to bring high-tech to Be'er Sheva. There is neither high-tech nor cyber. People received grants from the state and returned to Tel Aviv. They were not able to move people to Be'er Sheva. Yokneam managed somehow, but Yokneam is not such a suburb and the success is at a small scale."
So why are you blaming the state?
"Because a culture of exits has been created here that does not produce factories and jobs. There is a statistic that claims that 95% of high-tech capital in Israel comes from abroad, so profits also go there. The state could have steered high-tech investments so that there would be fewer exits, and many more resources would have remained in Israel. They did this until the 1990s. Until then, if you received money from the chief scientist, you had to invest here, and there were restrictions on the sale of patents - in the 1990s, restrictions were removed."
What do you think about the distribution of budgets?
"Not enough money is invested in Arab education and education in the periphery. And, let's be honest, I think Kinneret College should have received four times the budget of Tel Aviv University, but we receive much less."
So what is the solution, if there is one?
"We need to start in the kindergartens as soon as possible. The situation in the non-public kindergartens is appalling. That's where the gaps begin. Taking people without a foundation and giving them an eight-month course and thinking they'll become programmers - that won't work."
I meant a solution that has a chance of actually happening.
"High-tech can be managed so that the periphery benefits. It shouldn't be at the expense of high-tech, but maybe they will earn a little less there, and maybe there will be regulation that will make it difficult because 95% of the capital is from abroad and therefore a lot of the profits go there. The problem is not the existence of a Startup Nation, but the way it is run. We can rethink the taxation of high-tech companies and the increase of taxation on capital."
Why are we unable to increase the proportion of women in high-tech?
"We did a study funded by the European Union in which we compared two traditional countries, Israel and Ireland, against two countries with high gender equality, Sweden and Norway. We discovered that in all countries, regardless of the culture of equality, only about 10% of high-tech entrepreneurs are women. There is no difference between Israel and Sweden. The high-tech environment is so masculine that it is stronger than the culture of the countries."
And Arabs?
"There is a resurgence of high-tech higher education studies in Arab society, but they still only make up a few percent of the employed. There are barriers. There is the matter that relocation to the center is not acceptable, nor is it easy for an Arab to rent an apartment in Tel Aviv. Also, 30% of high-tech is related to security, and Arabs do not serve in Unit 8200. In the end, Israeli society is racist. There is also a book comparing high-tech to a cult, everyone wears the same thing and thinks the same thing and it is not easy to fit in. There were 47 high-tech companies established in Nazareth last year, while in Tel Aviv there were 2,600."
So the gaps will only keep growing?
"In light of the population growth forecast, if we don't do something, the gaps will be much bigger."
